J.C. Penney Co. to close 33 stores

Published 7:45 pm, Friday, January 17, 2014

J.C. Penney Co. Chief Executive Officer Mike Ullman, intensifying efforts to revive the money-losing department-store chain, plans to close 33 stores and eliminate about 2,000 jobs to help save $65 million a year.

The closings and cuts will result in pretax charges of $26 million in the fourth quarter and $17 million in future periods, the Plano, Texas-based company said in a statement late Wednesday.

Ullman, who returned in April to replace Ron Johnson, has restored promotions, brought back popular private-label brands and reinstated commissions for some sales associates while ending his predecessor's strategy of remodeling the stores into collections of boutiques. The chain has gone nine straight quarters without a profit, and analysts surveyed by Bloomberg are estimating it will post a $207 million loss for the current quarter.

"The closing of 33 stores sounds like not all is well," Paul Swinand, an analyst for Morningstar in Chicago, said in a telephone interview. "It's also not a massive restructuring."

Of the stores being closed, two are owned by J.C. Penney, and the remainder are leases, Daphne Avila, a spokeswoman, said in an email. The majority are the chain's smaller formats, she said. These locations, which total about 400, didn't get remodeled under Johnson with special areas for such brands as Joe Fresh and Izod.

J.C. Penney stores in Trumbull, Danbury and Milford will remain open, while the store in Meriden will close, a spokesperson for the company told Hearst Connecticut Newspapers on Thursday.

The company in November reported its first gain in monthly same-store sales in almost two years amid rising demand for home products, men's apparel and women's accessories.

Last week, J.C. Penney reiterated its forecast that same-store sales would improve in the fourth quarter and that it would have more than $2 billion in liquidity at the end of the period. Still, the company failed to provide December sales data it had made public the previous three months. The shares dropped 10 percent that day and have fallen by more than half since the company announced Ullman was returning as CEO.

Ullman has raised about $3.89 billion to shore up J.C. Penney's finances after Johnson's reign led to a sales decline of 25 percent and a net loss of $985 million in its last fiscal year through February. Early on Ullman drew $850 million from a revolving credit facility, then arranged a loan commitment from Goldman Sachs Group Inc. that provided $2.25 billion in cash. He also sold 84 million shares, generating about $785 million after fees.